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Over 55? Avoid Making These 6 Mistakes with Your Retirement Plan

April 14, 2020

Based on watching tens of thousands of investors make self-directed investment decisions every day for the past seventeen years – I’ve seen success and some painful failures during upturns and downturns in the market. Here are a few words of advice when thinking about adjusting your retirement assets.

Potential pitfalls during this unnerving time… DON’T:

  • Think about taking a distribution from your IRA account to augment or replace income that has been reduced by the Corona Virus.  During the recession of ’07-08, there were many IRA holders that drew down on their IRAs to assist in making mortgage payments and meet other financial obligations. Unfortunately, some ended up in bankruptcy, losing not only their home but their savings for their future as well. They didn’t realize that IRAs, 401K plans, and most other retirement plans have significant bankruptcy safeguards. It should be the last funds to be tapped.
  • Borrow money from your 401K or similar plan to get you back on your feet.  While you cannot borrow from an IRA, your employer plan may have a provision to take a distribution of the lesser amount of $50,000 or half your balance. The problem is that if you don’t pay it back, it is deemed a distribution that may trigger a tax bill when you can least afford it. If it is not a Roth, and you are under 59.5, there is an extra penalty as well.  Additionally, you have taken your retirement investments outside a tax-protected environment, potentially making it more difficult to grow.
  • Attempt to time the market or make a killing because it “must” be at the bottom.  The current market has gone from the second-largest percent decrease to the fourth-largest increase in history, all within the space of two weeks. Unless you have clairvoyant skills beyond the “experts”, there is little evidence that market bets provide solid retirement returns. Besides, as we get older, roller coasters don’t seem to hold the charm they once did.
  • Panic, but keep informed and make moves prudently and without fear.  Selling out of every position or taking diversified holdings and moving them into a single asset destroys the ability to survive another “correction”. Instead, double down on education and look beyond traditional markets. Assets like real estate, notes, and perhaps new businesses that are bound to arise are all available for investment from anyone that has a retirement plan – through owning a self-directed IRA. 
  • Take on more risk to make up for lost investment wealth.  This is the equivalent of the haggard better hunched over a Las Vegas felt table at 4:00 a.m. – you know how this ends.

As Mark Cuban said a few days ago, “we are in America 2.0.” While that may be extreme, many aspects of our life will change permanently regardless of when a COVID-19 vaccine becomes available. Meanwhile, we must live, provide for our family, and prepare for our retirement.  

Planning and investing for retirement is more like a brisk walk and not a dash. With God’s grace, may you win the race and achieve your goals.

Glen Mather is founder and CEO of NuView Trust, a leading custodian of retirement and other tax-deferred plans, headquartered in Longwood, FL.  NuView currently holds over $1.4 Billion in self-directed assets.